Quality Assessment: Robust Financial Metrics Underpin Confidence
Sandhar Technologies has demonstrated strong operational and financial quality, which has been a pivotal factor in the upgrade. The company reported a healthy operating profit growth at an annualised rate of 32.46%, underscoring its ability to expand margins and manage costs effectively. The latest six-month period saw a significant rise in profitability, with PAT reaching ₹108.91 crores, reflecting a growth of 55.65% compared to the previous corresponding period.
Net sales have also shown impressive momentum, increasing by 25.39% to ₹2,455.01 crores over the last six months. This top-line growth is complemented by a strong return on capital employed (ROCE) of 13.29% for the half-year, which is notably above the sector average and indicative of efficient capital utilisation. The company’s ROCE for the half-year stands at 10.1%, reinforcing its operational strength.
These quality metrics have contributed to a Mojo Score of 71.0 and a Mojo Grade upgrade to Buy from the previous Hold, reflecting a solid fundamental base that supports sustainable growth.
Valuation: Attractive Pricing Relative to Peers and Historical Levels
Valuation remains a compelling reason for the upgrade. Sandhar Technologies is currently trading at ₹498.50, comfortably below its 52-week high of ₹600.10, offering a margin of safety for investors. The company’s enterprise value to capital employed ratio stands at a modest 1.8, signalling an attractive valuation compared to its peer group, which historically trades at higher multiples.
Moreover, the company’s price-to-earnings growth (PEG) ratio is an appealing 0.5, indicating that the stock price is undervalued relative to its earnings growth potential. This low PEG ratio suggests that the market has yet to fully price in the company’s robust profit expansion, making it a favourable entry point for investors seeking growth at a reasonable price.
Sandhar’s market capitalisation grade remains at 3, reflecting its mid-cap status within the Auto Components & Equipments sector, which offers ample room for appreciation as the company scales further.
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Financial Trend: Consistent Growth and Positive Momentum
The financial trend for Sandhar Technologies has been notably positive, with the company delivering strong results for two consecutive quarters. The latest half-year figures highlight a PAT growth of 55.65% and net sales growth of 25.39%, signalling sustained operational momentum. This consistent performance has been a key driver behind the upgrade, as it demonstrates the company’s ability to navigate industry challenges and capitalise on growth opportunities.
Long-term returns further reinforce this trend. Over the past year, Sandhar Technologies has generated a stock return of 34.55%, significantly outperforming the Sensex’s 10.29% return and the broader BSE500 index’s 14.19%. Over three and five years, the stock has delivered cumulative returns of 126.49% and 105.91% respectively, dwarfing the Sensex’s 38.36% and 61.20% returns over the same periods. This market-beating performance reflects the company’s strong fundamentals and investor confidence.
Institutional investors have also increased their stake by 0.52% in the previous quarter, now holding 17.04% collectively. This growing institutional participation is a positive signal, as these investors typically conduct rigorous fundamental analysis before committing capital.
Technical Analysis: Shift to Mildly Bullish Signals
The technical outlook for Sandhar Technologies has improved, contributing to the upgrade in the investment rating. The technical grade has shifted from sideways to mildly bullish, reflecting a more favourable price action and momentum in recent trading sessions.
Key technical indicators present a mixed but improving picture. The daily moving averages have turned mildly bullish, supporting short-term upward momentum. Meanwhile, the monthly KST (Know Sure Thing) indicator is bullish, although weekly KST remains mildly bearish. MACD readings on both weekly and monthly charts are mildly bearish, suggesting some caution in the medium term.
Other indicators such as RSI show no clear signal on weekly and monthly timeframes, while Bollinger Bands indicate a mildly bearish trend on the weekly chart but sideways movement monthly. Dow Theory and On-Balance Volume (OBV) indicators show no clear trend weekly and mildly bearish monthly, signalling some consolidation but no major downtrend.
Overall, the technicals suggest a cautious but improving trend, with the stock price recently rising 2.69% on the day to ₹498.50, trading within a range of ₹479.55 to ₹503.85. The 52-week low stands at ₹329.00, indicating significant upside potential from current levels.
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Comparative Performance and Sector Context
Sandhar Technologies operates within the Auto Components & Equipments sector, a segment that has seen mixed performance amid global supply chain challenges and evolving automotive trends. Despite these headwinds, Sandhar’s ability to deliver strong financial results and maintain operational efficiency sets it apart from many peers.
The company’s 1-year return of 34.55% significantly outpaces the Sensex’s 10.29% and the BSE500’s 14.19%, highlighting its superior market performance. Over longer horizons, Sandhar’s returns remain impressive, with a 3-year return of 126.49% compared to the Sensex’s 38.36%, underscoring its consistent outperformance and growth trajectory.
Valuation metrics further support the upgrade, as Sandhar trades at a discount to peer averages, offering investors an attractive entry point in a sector poised for recovery and growth driven by increasing demand for automotive components and electrification trends.
Conclusion: Upgrade Reflects Balanced Optimism Backed by Data
The upgrade of Sandhar Technologies Limited’s investment rating to Buy is a reflection of a balanced and data-driven assessment across quality, valuation, financial trend, and technical parameters. The company’s strong financial performance, attractive valuation, positive earnings momentum, and improving technical indicators collectively justify the enhanced rating.
Investors looking for exposure to the Auto Components & Equipments sector may find Sandhar Technologies an appealing proposition given its market-beating returns, robust fundamentals, and growing institutional interest. While some technical indicators suggest caution, the overall trend is mildly bullish, supporting the positive outlook.
As always, investors should consider their risk tolerance and investment horizon, but the comprehensive upgrade signals that Sandhar Technologies is well-positioned to deliver value in the medium to long term.
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